13 April 2017

JAB and BDT Capital to buy Panera Bread

Eat-in bakery café Panera Bread agreed last week to be acquired by JAB Holdings (JAB) and BDT Capital for around USD 7,500 million in cash. This is the 11th largest deal to have been announced or completed in the US this year, according to Zephyr, the M&A database published by Bureau van Dijk. The transaction came just days after a person familiar with the matter told Bloomberg the Nasdaq-listed group could potentially be targeted by JAB, Starbucks and Domino’s Pizza.

JAB and BDT Capital have priced Panera Bread’s stock at USD 315 each, representing a 15.0 per cent premium to its close on 4th April, the last trading day prior to the announcement. Although the board has given the go ahead, the purchasers will need the approval of shareholders before closing the deal by the end of September this year.

While the deal with JAB is being secured, 3G Capital Partners is barging in with a USD 7,090 million rival bid to acquire Panera, the New York Post reported. To sweeten the terms, the owner of Burger King even offered to pay JAB a termination fee of USD 215 million. This is barely weeks after 3G Capital-backed Restaurant Brands International took over fried chicken fast food chain Popeyes Louisiana Kitchen for USD 1,800 million. The private equity firm also recently considered buying Unilever through Kraft Heinz for about USD 143,000 million, a deal it later abandoned.

Panera prides itself on its fresh ingredients and antibiotic-free chickens. Through 2,036 cafes in the US and Canada, it serves freshly baked food including bagels, made-to-order sandwiches and scones.

The company’s founder Ron Shaich, who is offloading his stake, told the Financial Times (FT): “I don’t believe our public markets are best served by maximising profits for tomorrow.” He added: “For me personally, and civic society, it’s far better to figure out the medium and long term. 

As the quality of produce increases and prices decline in supermarkets, consumers are increasingly choosing to eat at home, according to the FT. However, even as the restaurant industry slows, Panera has successfully boosted its market share. This is largely due to its strategy of providing customers with healthier menus and the option of mobile ordering and payment, the newspaper reported.

The restaurant chain posted revenue of USD 2,795 million in the 12 months ended 27th December 2016, up 4.2 per cent on the USD 2,682 million recorded during the same timeframe in the previous year. Net income for the period, however, fell slightly to USD 145 million from USD 149 million in 2015.

© Zephyr